The Bharatiya Janata Party’s economic resolution has steered clear of a single tax like banking transaction tax and instead pitched for simplification of the fiscal regime. But it has criticised the retrospective taxes of the government which it claimed delivered a “body blow to Indian and foreign investor confidence”.
It has also come out in support of the Reserve Bank of India saying, “the government tried to pass the buck on the RBI for its own failure” to control inflation. While it does not accept there is any need to expand organised retail including foreign investment, it accepts that inflation is a supply side issue.
“Instead of addressing the supply side issues to arrest inflation, the government continued with squeezing the demand and investment by raising the interest rate for 17 times,” it notes. The resolution passed at the national executive committee meeting of the party will be expected to be fleshed out more as the party bids to form a government in the general elections later this year.
The main element of the paper are criticism of the slowdown because of what it calls policy paralysis and also makes a striking point that the government is cooking its data. “For the first time the reliability of government data is being questioned,” it adds.
Commenting on the paper public finance economist DK Srivastava, Chief Policy Advisor, Ernst &Young said the objective is “welcome but the diagnosis seems to be a bit incomplete”.
According to him what is needed right now is increasing the domestic savings. It will be crucial to lower the interest rates and expand investments which will in turn spur growth. “The next government also needs to cut down on its consumption expenditure and revenue deficit,” he said.
Expanding on the theme BJP president Rajnath Singh on Sunday highlighted concerns over the slowing economy and said that issues of laggard industrial output, a high current account deficit, spiraling inflation, complex tax regime and low investments in infrastructure must be taken up head on.
“The wheel of country’s development which was moving at a pace more than 8 percent during the NDA regime has now slowed down below 5 percent… Today most of the large economies in the world are ‘reviving’, the Indian economy facing the problem of ‘surviving’,” he said at the same meeting.
In a welcome comment, Singh’s panacea for the ailing economy included developing the bond market to attract investments into infrastructure, boosting exports to curb the CAD and encouraging the manufacturing sector to enable it to contribute at least 20 per cent to the GDP.
Singh also promised novel ventures such as farmer markets and a special working committee on organic farming.
Devendra Kumar Pant, chief economist at India Ratings said, “A number of steps have been taken in each of these areas but there sure needs to be a firm roadmap to revive growth”. For instance the National Manufacturing Policy in any case targets to increase contribution of manufacturing to GDP to 20 per cent so the details will have to be filled in, he said.
The Indian economy slowed to a decade low of 5 per cent in FY13 and GDP growth is likely to remain muted this fiscal too after registering a 4.6 per cent growth between April and September 2013. Manufacturing activities now account for only 14.6 per cent of value add for the economy this financial year.
The BJP resolution has also punched holes in the UPA government claim that it has provided the best deal to the farmers. With data from the Commission for Agricultural Cost and Prices the party has attempted to show that rising minimum support prices have been nullified by faster rising input costs.
So it concludes that farmers are earning less from their efforts. The margin of profit has decline for both paddy and wheat cultivation has shrunk to 8.5 per cent and 13.91 per cent in FY13 from 34.77 and 33.17 in FY11, the document shows.